Italian Prime Minister Silvio "Bunga Bunga" Berlusconi announced today that he will be
resigning his post after his parliament votes on austerity measures that the European Union is trying to force upon the country. This follows the resignation last week of Greek Prime Minister Papandreou, who
stepped down after threatening
a referendum that has since been cancelled. The Eurozone Crisis has claimed its biggest victim in toppling Berlusconi, who has a penchant for clinging to power despite corruption and scandal being synonymous with his name. For seventeen years he has dominated politics in Italy, surviving
scandals that would doom any other leader in the Western world---sex with underage prostitutes, orgies at his mansions, constant corruption trials, public feuding with his wife in the newspapers, close ties with Gaddafi, even the loss of popular support. Though Italians hate the man, they have often been at a loss for words when asked, "If not Berlusconi, then who?" The fact that he ruled from the conservative party was even more of a bulwark--the Italians are so terrified of giving the Italian Left a chance to govern that they would rather put up with Berlusconi's antics than pass the baton.
In the end, though, the poison spreading through Europe's troubled economies are what did him in. Turmoil in the markets, an absolutely astronomical amount of debt in Italy, and pressure by the other leaders of the European Union have
finally ended Berlusconi's time in power. For weeks now, Berlusconi had been seen as one of the largest obstacles towards saving the Euro due to his lackluster support for economic reforms, losing control of his coalition, and a seemingly uncaring, combative attitude in dealing with both rival Italian politicians and fellow European heads of state. He was seen as so much of an obstacle that markets actually have
started to pick up a bit on the news of his imminent departure. (
Update: Reverse that; Italian bond yields
are flying up to unsustainable levels. Not looking good).
The question of who will replace Berlusconi is a much more difficult one to gauge. President Giorgio Napolitano may step in, but the 86-year-old former communist may not be up for taking control of the government during such a crisis; Napolitano will probably play the role of kingmaker. Gianni Letta, Berlusconi's deputy and the one most likely to take charge of the center-right coalition currently governing Italy, is another option--but his closeness to the Bunga may be harmful. The young Angelino Alfano has often been seen as an heir to Berlusconi, but, again, the 41-year-old may be toxic right now due to his relations with his boss. However, Alfano has the backing of Umberto Bossi, leader of the Northern League and a man integral to any center-right coalition that will form in parliament. Other possibilities are technocratic economist Mario Monti or centrist politician Pier Casini, the latter of which is calling for a broad unity government. I personally think that Alfano may be able to pull together enough support if he can talk in Letta to back him. The rest of the year is certainly going to be interesting in Italy, and whoever takes charge will have a profound impact on whether or not the European Union can weather the Eurozone Crisis.
Someone ought to let Bill Clinton or John Edwards know that there is a job opening for either one of them in Italy. Too bad Ted Kennedy isn't still alive. He would be more qualified than either Clinton or Edwards.
Next European country to fail. California - the Stupid State.
As you point out, European leaders are so bad as to potentially be worse than the regulators and bureaucrats in Brussels or the IMF.
In terms of Greece and Italy, I think a solution that would preserve sovereignty, prevent default (or take the possibility of it off the table) and still maintain the feasibility of the Euro is to make a simple change in the language of the bonds, in particular the default provision.
Currently if Greece defaults the bonds would be worthless... but Greece could eliminate the default risk simply by allowing these transferable securities to be used to pay taxes.
A bank could then hold massive quantities of greek or spanish or italian debt nearly risk free, since it could simply cash in these bonds when the clients are required to pay taxes to the respective government.
These bonds are already transferable, and banks already pay taxes on behalf of clients who have deposits with the bank.
If Italy, Spain and Greece changed the default language/mechanics of the bonds the yields would drop considerably (and these might even become preferable to say French bonds).